The rule breakers have become the rule makers. In the past decade since Sephora landed in America, Ulta came to prominence, TV shopping gained new respect and Internet shopping exploded, multichannelism has become the new language of beauty retailing in the U.S. This new world contrasts sharply with the old order of the Seventies and Eighties, when an entire generation of sales executives carved a career out of single-mindedly plying either the department stores or the mass chains alone. A new breed of indie brands — like Benefit Cosmetics, Bare Escentuals, Philosophy and Smashbox — emerged in the Nineties and became the masters of a distribution game of their own invention, driven by the advent of more savvy, more plugged-in and more demanding women who follow their own shopping code.
This story first appeared in the November 11, 2011 issue of WWD. Subscribe Today.
These upstart brands succeeded largely without the help of traditional retail. Liz Garrett, president of Philosophy, notes that nearly 58 percent of her business comes from online shopping and QVC combined. “The majority of our business is done where the customer can’t touch or feel [the product],” she says.
“It’s the Wild, Wild West; a lot of rules are being broken,” says Betsy Olum, general manager of beauty and merchandising strategy of HSN.
Wendy Liebmann, chief executive officer and chief shopper of WSL Strategic Retail, views retail evolution as an “old-world, new-world” story. “The idea of selling in mass or in prestige — that hierarchy has totally imploded,” she says, dividing the customer base into veteran and emerging consumers. The vets want to walk into department stores and get service, not be hounded. They don’t want to be ignored at mass, nor do they want to shop for makeup among the groceries. Young shoppers do their homework online before walking into a store, want to be able to touch the product and hate being intimidated, Liebmann says.
“The customer looks for different things in different places,” says Claudia Lucas, director of merchandising, beauty, at QVC.
“We want to be where [the customer] is,” says Myles McCormick, chief executive officer of Bare Escentuals. “She makes 50 percent of her purchase decisions at point of sale. Reach is extremely important.”
That has elevated the importance of myriad channels, from specialty stores like Sephora and Ulta, to QVC and HSN, online retailing, brand-owned boutiques and infomercials, as well as the traditional bases in department stores and mass retailers. Liebmann notes that even fashion stores like Forever 21 are merchandising beauty items to make an extra sale.
In breaking the rules of the old order, lessons have been learned about navigating the new world of multichannel. Aurelian Lis, general manager of North America for Benefit Cosmetics, sees his audience divided into “disparate groups” of consumers with some shopping overlap, but all with different needs. Benefit has separate sales teams to champion individual retail channels, each of which offers consumers distinctly different experiences. Specialty store chains, for example, are “an unbiased playground” providing the consumer with a best-of-category editorial voice. In the department stores, Benefit has counters to “curate” its message through brand merchandising and services such as brow shaping. The freestanding Benefit boutiques generate add-on sales and become brand beacons. Lis notes that when he recently opened a store in New York’s SoHo neighborhood, business improved in the surrounding retail outlets, primarily through word of mouth.
Each channel has to be catered to; the brand message must be consistent while the peripherals change for each channel. For instance, a mailer for HSN may urge a consumer to watch a Benefit program, while a similar piece for a department store may be an invitation to an in-store event. McCormick of Bare Escentuals stresses that navigating so many channels means keeping “an ongoing balance in keeping the brand message consistent while leveraging what is special about the retail partners.Whenitworks,itisawin-winsituation.”
However, he warns against becoming too channel focused. “When a brand starts to look different from one channel to another, it loses consistency,” he says. “The consumer doesn’t know what she is looking at.”
There seems to be little danger of that. Lis says that as a measure of the impact of the distribution revolution, retailers are starting to pay attention to what brands are doing in other channels. Which is why Jill Scalamandre, chief marketing officer of StriVectin, says the trick is to put a finger on the driver of each channel and weave unique experiences in each — through exclusive products, smaller sizes to spur trial, kits for more involved trial, and offering value and larger sizes to reward the customer.
“It’s about transparency,” says Scalamandre. “Being in other channels provides more consumer awareness for small brands. You’re casting a halo across the channels.” “It’s a dance,” agrees Philosophy’s Garrett. “The pitfall is if you try to do the same thing across the board, you’re going to [anger] customers at all levels.” As Scalamandre says, all this mixing and matching and channeling “puts more pressure on the brands.” Take Philosophy, which logged 130 hours of showtime on QVC last year.
One week in June, the brand was on air for 13 hours, and Philosophy offered something new — a flavor, a kit, a configuration — for every show.
Lucas at QVC sees the network’s strengths in value, education and newness. A QVC talent lies in supersizing products and designing kits. An example of uniqueness is an upscale Neutrogena Dermatologics line that the giant mass market brand has been retailing on the TV network exclusively for the last two years. One of the hottest items is a $79 retinol serum, a quantum jump in price above the Neutrogena items sold in drugstores. That is a case of mass bubbling upward, but Lucas has many other examples of prestige cohabiting on TV, such as Givenchy’s Phenomen’Eyes mascara that went on air two weeks ago.
Lucas notes that the most difficult aspect of working with prestige brands is to make them understand the nuances of direct TV shopping. “We don’t discount,” she says, “but we talk value.”
And a lot of people are listening to that message, judging from beauty’s share of the business on television shopping networks. “More than any other category,” Lucas says, “the first purchase on QVC is a beauty product.”